An improved bond rating is expected to lower the city's borrowing costs.

"This is a proud moment for the city and excellent news for our community reflecting two years of hard work and discipline," Mayor Tim Flynn said in a statement. "Adjusting rates was necessary to get the city's wastewater fund back into good shape. Our work has paid off."

Assistant City Manager Jesus Nava said the rating change makes the bonds more valuable and the city can pay less in interest.

Last year, the City Council approved a series of wastewater rate increases despite a voter-approved ballot measure to repeal the rates. Aaron Starr, who wrote the ballot initiative launched a recall campaign on most of the council members who supported the rate increases.

The recall did not go through but Starr won a lawsuit filed by the city challenging his ballot measure. Due to this court decision, the city could face having to pay nearly $6 million back to rate payers.

This possible payment did not affect S&P's decision to raise the credit rating.

"We believe that the system has the capacity to make these refunds without adversely affecting credit quality at the current rating level," according to the report.

In 2016, when the bond rating was "BBB," S&P downgraded the outlook of the wastewater fund to negative, an indication that the credit rating could also be downgraded. City officials said raising the rates and challenging Starr's ballot initiative was a necessary step in order to meet its bond obligations.

"The stable outlook reflects our expectation that the wastewater system will likely post at least good financial performance going forward with no further interruptions to the normal rate-setting process," according to the report.